a company has sales of $150 million, cost of goods sold of $100 million, and a before tax profit of 8%. if purchasing was able to reduce the cost of goods sold by $5 million, how much additional sales would be required to achieve the same impact on profit?

$62.5 million of additional sales will be required to achieve the same profit, a company has sales of $150 million, cost of goods sold of $100 million, and a before tax profit of 8%.

We presume that a before tax profit of 8% means “before tax profit = 8% of Sales value”

When cost of goods sold is reduced by $ 5 million , profit will go up by equal amount i.e. $5 million

Based of above formula ,

8% of Increase in sales value = Increase in profit ( i.e. $ 5 million)

Hence , Increase in sales value = $ 5 million / 8% = $5/0.08 = $62.5 million, Profits generated prior to paying taxes are taken into account when calculating a company's profitability (PBT). It compares all of the company's costs, such as operational and interest costs, to its receipts but leaves out the payout of income. A metric called "profit before tax" examines a corporation's earnings before the company is required to pay corporate income tax. In essence, it is all of a company's profits before taking any taxes into account. Operating profit less interest appears on the income statement as profit before taxes.

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